The IBIT Options Strategy That Pays You To Harvest Bitcoin Volatility

There are a lot of different ways to make money from Bitcoin. Some traders attempt to profit from every up and down move, often using leverage. Others simply buy and HODL, trusting that over multiple market cycles Bitcoin’s price will eventually be higher due to the halving cycle and the ongoing debasement of fiat currencies.

The launch of spot Bitcoin ETFs has introduced another option.Products like the iShares Bitcoin Trust ETF (IBIT) have opened up a whole range of strategies that were previously unavailable to many retail investors. Thanks to a highly liquid options chain featuring multiple strike prices and weekly expirations, investors can now generate income directly from Bitcoin’s volatility.

One of the more interesting approaches is called the wheel strategy. Instead of selling cash-secured puts and covered calls separately, the wheel combines both into a repeating cycle. The strategy works particularly well on Bitcoin because higher volatility generally translates into higher option premiums.

Step One: Start the Wheel by Selling a Cash-Secured Put

The wheel always begins with a cash-secured put. When you sell a put option, you are giving another investor the right, but not the obligation, to sell you 100 shares at a predetermined strike price. Because you could be required to purchase those shares, your broker requires enough cash to cover the obligation.

As of June 9, IBIT trades at approximately $35 per share. Suppose I think Bitcoin has a bit more downside ahead and would prefer to enter at a lower price. Rather than buying immediately, I could sell a slightly out-of-the-money put at the $34 strike. Remember, you should only sell puts at prices where you are genuinely comfortable taking assignment.

Looking at the June 30 expiration, we’re seeing a bid of $1.12 and an ask of $1.20. Using the midpoint gives an estimated premium of $1.16 per share. Because each contract represents 100 shares, that works out to roughly $116 in premium collected upfront. Against the approximately $3,500 required to secure the position, that’s a yield of about 3.3% on the capital committed to the trade.

From there, one of two things happens in 21 days. If IBIT remains above $34 at expiration, the put expires worthless and you keep the entire premium. But if IBIT falls below $34, you are assigned 100 shares at the strike price and move to the next stage of the wheel.

Step Two: Sell Covered Calls and Repeat the Process

This is where the wheel earns its name. If the put expires worthless, you simply sell another cash-secured put and repeat the process. If you get assigned shares, you then switch to selling covered calls on your newly acquired long IBIT position.

A covered call involves owning 100 shares and selling a call option against those shares. Ideally, you want to choose a strike price near or above your original assignment price so that if the shares get called away, you’re exiting at a profit or at least breaking even while also keeping the premium.

The risk comes when the underlying asset falls sharply. Suppose you were assigned shares at $34 but IBIT subsequently drops to $28. You may find that selling a covered call at your original cost basis (now out of the money) produces very little premium. In some cases, investors are tempted to sell in-the-money calls to generate more income.

That can work, but it also increases the chance of having shares called away below your original purchase price. The premium helps offset some of that loss, but not necessarily all of it. That’s why the first step matters so much: Selling puts far enough out of the money gives you a larger margin of safety and reduces the odds of immediately ending up underwater after assignment.

One final consideration is taxes. Option premiums are generally treated as short-term capital gains when positions expire. If shares are assigned or called away, the tax treatment becomes more complicated because the option activity can affect your cost basis and realized gains. For that reason, many investors prefer running wheel strategies inside tax-advantaged accounts when possible.

The strategy is not risk-free. Bitcoin remains highly volatile and IBIT can experience substantial price swings. But for investors who already want Bitcoin exposure, the wheel offers a structured way to harvest some of that volatility rather than simply enduring it.